Paul Mason’s Capitalism

Paul Mason today gave a ‘sermon’ (they even made us sing hymns!) on what he describes as Post-Capitalism. Without yet having read his book I wanted to address a few of his points based on his talk. Therefore some of my issues and criticisms may be cleared up at a later date. I find it ironic that he describes post-capitalism as being based on the shareholder economy which arises through voluntarism, yet the talk cost £20 per ticket and was followed by a book sign afterwards, which was also sold – but hey, we haven’t reached the post-capitalist state yet!

My first criticism with the whole idea (I think the same as Iain Martin’s) is that he seems to describe capitalism as an ideology, when in fact it is simply a system to distribute scarce resources. If he was more specific in his reference to an ideology – accusing neo-liberalism of being such – then I could agree. Moreover, he treats capitalism as a static system, thinking that the economic system is currently – and presumably has been for the last 200 years – capitalist, but that his future ‘gift’ economy is something different, and is therefore post-capitalism. Yet, capitalism is incredibly dynamic, and fundamentally is simply a system under which property rights are issued to protect assets and lead to the distribution of resources. Capitalists are those who won these property rights: they own the factors of production and capital and direct these, if they so wish, to the production of goods and services. Note, that I am not going into whether I see this as a just, or efficient system, but I don’t see it as an ideology. More importantly, I don’t see it as static. Therefore I think it is misconceiving to think of Mason’s “Post-Capitalism” idea as a new state of being but merely a transition in the ever-evolving system of capitalism, a little similar to how “Fordism” became the dominant production system after World War II. This Fordism was the mass-production of goods based on mechanical technology and the ability to create homogeneous products due to the state, and willingness, of the consumer market. I hence see Post-Capitalism (which I would describe as the ability for some services – largely in the information sector – to be provided for free by people who are willing to give up their time to do so) as being very embedded in the capitalist system, and therefore no-where near as radical as perhaps the attention it is receiving would suggest.

Mason believes that information technology has corroded the mechanism of capitalism in pricing, links between wage and work and levels of hierarchy and management. The development of IT has meant that the marginal cost of many goods either tends to, or equals zero. He gives the example of music, books and films where, once they have been produced can be replicated at near zero cost. This makes it difficult to set price, and in theory it should therefore tend to zero. He sees issues with protecting property rights when it is so easy to pirate electronic media. But I don’t think this is something new – an example of another service with near-zero marginal costs, which comes to mind easily, is that of rides in amusement parks (for those who have read the Disneyland Dilemma, published in 1971, showing MC=0 is hardly a new phenomenon). Anyhow, only in competitive markets would we expect price to equal marginal cost (P=MC), when monopolies exist – Mason points out how relevant these are in the IT world – the price need not equal MC. This makes it seem like less of a problem, and can hardly mean that IT is corroding away at a fundamental mechanism of capitalism as Mason proposes. On the issue of piracy, this is theft which ought to be dealt with as such and new technological methods of preventing this are arising (for example the introduction of code in files legitimately downloaded which allows law-enforcement to track down who initially distributed files illegally and allows for its quick and easy removal from file-sharing websites and search-engines). Interestingly though, he does point out how iTunes sells music for a fixed price of £0.99 regardless of demand and supply which would go against orthodox economic views, that the price should be higher for music in greater demand, even if it isn’t a limited good. I think my final criticism of this view is that MC = 0 is only a phenomenon experienced for a limited range of goods and services.

On the issue of wage and work life links being destroyed, Mason points out that the number of high skilled workers demanded is falling, pointing out the Oxford Martin study (Martin and Frey), on how technological advances will wipe out 47% of jobs in the labour market. Yet as Martin and Frey themselves are quick to point out in their paper, they don’t evaluate where new jobs may arise from and most economists now recognise that technological advances open up new possibilities for job creation. A lot of people were scared during the Industrial Revolution that machines would destroy jobs and leave many unemployed, whilst these new technologies did necessitate a shift in the type of jobs which were required it opened up many new job opportunities, and increased employment. If technology increases the productivity of workers then economic theory tells us that demand for labour will rise. Even if these new jobs are what David Graeber would describe as “bullshit jobs“, they are jobs none-the-less. Mason also sees it as a problem that the distinction between work life and home life is being blurred by technology, for example people constantly being connected to work email and being able to log on to work servers at home. Yet, this isn’t something new. In Robert Tressels novel, the Ragged Trousered Philantropists, of early 20th century decorative workers many often took home work to complete. The daily commute – unpaid and intrusive on what should be leisure time, seeing as it isn’t contracted – has impacted leisure time since at least the dawn of the factory. So it hardly seems accurate that technology is socially disruptive in blurring the boundary between home and work life; it would seem that there never has been a proper boundary. Keynes, in his essay Economic Possibilities for our Grandchildren, pointed out that humans have a natural instinct to work, and therefore need to do at least some work, although he limited this to around 3 hours a day, to stop them going crazy. Pointing out that the wife’s of rich aristocrats, in the 1930s, threw themselves into charity work despite having the ability to live a life of leisure – simply because they needed to do something and wanted a sense of value from the work they do. Mason did allude to this in his talk, and said that even if we had a post-capitalist society where work wasn’t necessary, some would have to be created, or new forms of leisure devised, to overcome humanities natural instinct to work and procure resources for itself.

Finally, Mason sees the traditional capitalist mechanism of hierarchy and management as being eroded through organisations such as Wikipedia, Linux and Apache which aren’t centrally managed but are a collective action. An easy evaluation of this is that despite their importance (Linux powers a high percentage of super computers, and Apache runs many servers) they hardly represent a large share of the economy or number of firms. He delves deeper into the view that technology allows networks to be created, with people volunteering their time from across the globe. Wikipedia, Linux and Apache along with many gaming sites, forums, blogs and learn economic websites are all produced for free (occasionally with advertisements, but generally this is simply to pay operational costs, rather than pay the opportunity cost of leisure/work for the creators) but this is limited to a few sectors where this is possible, largely in the information service arena. Even outside this, in things like Uber (taxis), and apps which allow you to rent out personal property there are limits to what can be achieved and their popularity hasn’t yet confirmed this as a successful business model.

Yet again, the notion that this “gift” economy – whereby people create goods, services and information for free – is something new is wrong: looking again to the industrial revolution we see that many inventors created their machines and released them for free (i.e. didn’t put patents on them). As Mokyr points out, part of this was due to the high-cost and low-enforcement of patents prior to the 1850s, but fundamentally it was due to the cultural norm of Baconianism where inventors wanted to create things not for direct financial gain but for fame and patronage. Perhaps more strikingly we can look at charities – millions of people give their time for free to do charity work, volunteering to help the less-needy, showing that the “gift” economy is nothing new.

As behavioural economists like Dan Ariely point out, people gain satisfaction from doing challenging, and rewarding work like writing blogs and creating intricate pieces of software without being remunerated. But what about the jobs which aren’t intellectually stimulating or desirable but still necessary. Who will do these jobs in a post-capitalist society where work isn’t necessary? Sure, machines can do some jobs, but we haven’t yet got to a stage where technology is sufficient to complete all these jobs: does this mean that post-capitalism can’t be reached until we have sufficient technology to alleviate ourselves of the need to do these undesirable jobs?

Hopefully I’ll update this once I’ve eventually had a chance to read his book and can rectify some of my, potentially ill-perceived criticisms.